Planit:Detailed Takaful Policies Case Study

Example Problem One:

Nidal and Rasha are concerned that the event of Nidal’s death would cause financial instability and want to know the funds required to replace his income. They have given you the detailed information for their insurance:

• Nidal’s Family Takaful of RM 250,000 (RM 50,000 in the participant’s account and RM 200,000 sum assured) is designated to the estate on his death. He plans to continue participating in this takaful until he dies. Right now he contributes RM 170 each month.
  • In the event of disability, this policy pays out it’s full amount of RM 250,000 in the first year. It is not taxable, and not indexed.
• Rasha’s Whole Life insurance policy of RM 100,000 is designated to the estate on her death. Right now she pays a premium of RM 100 each month.
  • In the event of disability, this policy pays out its full amount of RM 100,000 in the first year. It is not taxable, and not indexed.
• Nidal’s Group Life Coverage of RM 70,000 is company paid and the Estate is the beneficiary.
  • In the event of disability, this policy pays out 25% of its full amount of RM 70,000 in the first year, 25% in the second year, and the remaining 50% in the third year. It is not taxable, and not indexed.
• Rasha contributes RM 600 each year towards the participant portion of the short-term family takaful of RM 70,000 and the estate is the beneficiary.
  • In the event of disability, this policy pays out 10% of it’s full amount of RM 70,000 in the first year, 10% in the second year, and the remaining 80% in the third year. It is not taxable, and not indexed.

Solution using the Life Insurance Calculator:

After selecting Nidal and Rasha from the Client Search page, return to the home page, change the drop-down menu option under Client Data Entry to Income Replacement. Use the menu to go directly to the Insurance screen.

1. To enter the new detailed information, click Policies in the right hand corner.
2. Click Policy again in the right hand corner
3. Enter a Description for Nidal’s personally owned family takaful.
4. Set the Account Type and Regulatory Type to Insurance Policy
5. Ensure that the Ownership is set to 100% for Nidal Dhakir.
6. Here you can enter the Payment Mode of Monthly, and the $170.00 Payment Amount.
7. Click Save

1. Nidal’s Personal Takaful should now appear on the summary screen. Click Coverage beside it to add value to the policy.
2. Enter a Description and set Type to Whole Life since he plans to participate in it until he dies.
3. The Insured is Nidal
4. The Death Benefit is $250,000 since both the participant’s account and the sum assured will act as a benefit.
5. Set Estate as the Beneficiary in the drop-down menu, click Save

1. You can also add the disability coverage Nidal has through his personal takaful to the same policy account. Click Coverage beside it to add value to the policy.
2. Enter a new Description and set the Type to Disability (Personal).
3. The Insured is Nidal, and the Lump Sum Benefits are $250,000 as was previously revealed.
4. For the 1st Year enter 100% so all of the policy will pay out at once.
5. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
6. The Index Rate is already correct at the default of 0%.
7. Click Save

To add Nidal’s group life coverage:

1. Click Policy again in the right hand corner
2. Enter a Description for Nidal’s company paid life insurance.
3. Set the Account Type and Regulatory Type to Insurance Policy
4. Ensure that the Ownership is set to 100% for Nidal Dhakir.
5. Here you can enter the Payment Mode as any of the options, since the Payment Amount is $0
6. Click Save
7. Nidal’s Group Life Policy should now appear on the summary screen. Click Coverage beside it to add value to the policy.
8. Enter a new Description and set the Type to Group Life.
9. The Insured is Nidal, and the Death Benefit is $70,000.
10. After setting Estate as the Beneficiary in the drop-down menu, click Save

To add Nidal’s work disability insurance:

1. Nidal’s Disability Policy should now appear on the summary screen. Click Coverage beside it to add value to the policy.
2. Enter a new Description and set the Type to Disability (Group).
3. The Insured is Nidal, and the Lump Sum Benefits are $70,000 as was previously revealed.
4. For the 1st Year enter 25%.
5. The 2nd Year was 25% also.
6. The 3rd Year pays out the remaining 50%.
7. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
8. The Index Rate is already correct at the default of 0%.
9. Click Save

To add Rasha’s personally owned life insurance:

1. Click Policy again in the right hand corner
2. Enter a Description for Rasha’s personally owned life insurance.
3. Set the Account Type and Regulatory Type to Insurance Policy
4. Ensure that the Ownership is set to 100% for Rasha Nadhir.
5. Here enter the Payment Mode of Monthly, and the Payment Amount of $100.00
6. Click Save
7. Rasha’s Personal Life Policy should now appear on the summary screen. Click Coverage beside it to add value to the policy.
8. Enter a new Description and set the Type to Whole Life.
9. The Insured is Rasha, and the Death Benefit is $100,000.
10. After setting Estate as the Beneficiary in the drop-down menu, click Save
11. You can also add the disability coverage Rasha has through her personal policy to the same policy account. Click Coverage beside it to add value to the policy.
12. Enter a new Description and set the Type to Disability (Personal).
13. The Insured is Rasha, and the Lump Sum Benefits are $100,000 as was previously revealed.
14. For the 1st Year enter 100% so all of the policy will pay out at once.
15. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
16. The Index Rate is already correct at the default of 0%.
17. Click Save

To add Rasha’s short-term family takaful coverage:

1. Click Policy again in the right hand corner
2. Enter a Description for Rasha’s short-term takaful.
3. Set the Account Type and Regulatory Type to Insurance Policy
4. Ensure that the Ownership is set to 100% for Rasha Nadhir.
5. Here you can enter the Payment Mode as annual, and the Payment Amount as 600.

Note: Even though this is a contribution and not a traditional insurance premium their treatment for this field should be the same.

1. Click Save

1. Rasha’s Takaful should now appear on the summary screen. Click Coverage beside it to add value to the policy.
2. Enter a new Description and set the Type to Term Life.
3. The Insured is Rasha, and the Death Benefit is $70,000.
4. After setting Estate as the Beneficiary in the drop-down menu, click Save

To add Rasha’s disability portion:

1. Click Coverage beside the same policy to add the disability component.
2. Enter a new Description and set the Type to Disability (Personal).
3. The Insured is Rasha, and the Lump Sum Benefits are $70,000 as was previously revealed.
4. For the 1st Year enter 10%.
5. The 2nd Year was 10% also.
6. The 3rd Year pays out the remaining 80%.
7. Uncheck the Taxable Benefits checkbox, since they are not taxable when paid.
8. The Index Rate is already correct at the default of 0%.
9. Click Save

At the end, all of your detailed insurance policies should look something like the figure below.

Go to the exercise to test your knowledge on detailed takaful policies.